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Treasury Management and Liquidity Risk Audit Checklist

A comprehensive checklist for auditing treasury management and liquidity risk practices in financial institutions, covering aspects such as cash flow management, funding strategies, liquidity stress testing, and regulatory compliance to ensure effective liquidity risk control and treasury operations.

Treasury Management and Liquidity Risk Audit Checklist
by: audit-now
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About This Checklist

Effective treasury management and liquidity risk control are critical for the financial stability and operational efficiency of financial institutions. This Treasury Management and Liquidity Risk Audit Checklist is an essential tool for evaluating and enhancing an institution's ability to manage its cash flows, funding sources, and liquidity risks. By meticulously examining cash management practices, funding strategies, liquidity stress testing, and regulatory compliance, this checklist helps identify potential vulnerabilities, optimize treasury operations, and ensure robust liquidity risk management. Regular implementation of this checklist not only safeguards against liquidity crises but also contributes to improved financial performance and regulatory adherence in an ever-changing economic environment.

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Industry

Financial Services

Standard

Basel III Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) requirements

Workspaces

Bank branches

Occupations

Treasury Manager
Liquidity Risk Analyst
Financial Controller
Risk Management Officer
Regulatory Compliance Specialist

Liquidity Risk Management

(0 / 4)

1
Is the contingency funding plan reviewed at least annually?

Select review status.

To ensure the contingency funding strategy is up-to-date and effective.
2
How frequently are liquidity stress tests conducted?

Provide frequency of stress tests.

To assess the regularity of stress testing in liquidity risk management.
3
What is the current Net Stable Funding Ratio (NSFR)?

Enter NSFR value.

To evaluate the long-term funding stability of the institution.
Min: 100
Target: 100
Max: 200
4
Is the institution compliant with the Liquidity Coverage Ratio (LCR) requirements?

Select compliance status.

To ensure the institution maintains adequate liquidity to meet short-term obligations.
5
Are regulatory changes factored into cash flow forecasts?

Indicate whether regulatory changes are considered.

To ensure compliance with financial regulations in forecasting.
6
How would you rate the accuracy of cash flow forecasts over the last year?

Select the accuracy rating.

To assess the reliability of cash flow forecasting accuracy.
7
What is the current forecasting horizon in months?

Enter the number of months for the forecasting horizon.

To evaluate how far into the future the cash flow is being projected.
Min: 1
Target: 12
Max: 36
8
What method is used for cash flow forecasting?

Specify the cash flow projection method used.

To understand the methodology applied for accurate cash flow projections.
9
Is the funding strategy aligned with the overall business strategy?

Indicate if the funding strategy aligns with the business strategy.

To assess the coherence between funding and business objectives.
10
How often is the funding strategy reviewed?

Provide the frequency of strategy reviews.

To ensure the funding strategy is regularly assessed for effectiveness.
11
What is the average cost of funds as a percentage?

Enter the average cost of funds percentage.

To understand the cost implications of the funding strategy.
Min: 0
Target: 3.5
Max: 10
12
How diverse are the funding sources used by the institution?

Select the diversity level.

To evaluate the risk related to funding concentration.
13
How many compliance violations were reported in the last year?

Enter the total number of compliance violations.

To assess the extent of compliance issues faced by the institution.
Min: 0
Target: 2
Max: 100
14
When was the last compliance audit conducted?

Enter the date of the last compliance audit.

To determine the recency of compliance evaluations.
15
Who is the designated compliance officer for the institution?

Provide the name of the compliance officer.

To identify the responsible party for compliance matters.
16
Is the institution compliant with all relevant regulatory requirements?

Select compliance status.

To ensure adherence to the legal and regulatory framework governing financial operations.

FAQs

These audits should be conducted at least annually, with more frequent reviews recommended during periods of market volatility or significant changes in the institution's funding structure.

Key areas include cash flow forecasting, funding source diversification, liquidity buffer adequacy, intraday liquidity management, stress testing methodologies, contingency funding plans, and compliance with regulatory liquidity ratios.

These audits are typically conducted by internal audit teams, treasury specialists, risk management professionals, or external auditors with expertise in treasury operations and liquidity risk management.

The checklist includes items that assess the comprehensiveness of stress scenarios, the quality of data inputs, the appropriateness of assumptions, and the integration of stress test results into liquidity risk management strategies.

Yes, the checklist can be customized to address specific treasury management and liquidity risk requirements of various financial institutions, such as commercial banks, investment banks, or credit unions, while maintaining core audit elements.

Benefits

Ensures compliance with liquidity risk management regulations and internal policies

Identifies weaknesses in cash flow forecasting and management processes

Enhances funding diversity and stability of liquidity sources

Improves effectiveness of liquidity stress testing and contingency planning

Strengthens overall treasury operations and financial risk management